How a Consumer Proposal in Ontario, ON Works
A consumer proposal is a legally binding process that helps you create an offer – or ‘proposal’ – to your creditors.
The overall aim is to settle on a percentage of your debts to pay them, or to extend how long you have to pay off your debts, or both.
It can’t last longer than five years, and it is usually an idea reserved for people with a lot of debt.
You must work with a Licensed Insolvency Trustee to file your consumer proposal with the Ontario government.
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In effect, this is the first step in the filing process.
Never pay anyone to handle your consumer proposal unless they are licensed!
As it happens, we are Licensed Insolvency Trustees and can help you with this entire process.
You will receive a free debt assessment that looks at your financial situation and determines the best cause of action for you.
If a consumer proposal is deemed the best idea, you can go ahead with the filing process.
A typical consumer proposal process will look something like this:
Figure out your proposal
The most logical starting point is working out what you will offer the creditors.
This requires an in-depth analysis of your finances to determine what you can conceivably pay them.
Following this, you will deduce how much you can pay every month.
As a general rule of thumb, you need to offer creditors more than they would receive if you went bankrupt.
Otherwise, there’s no point in them agreeing to this proposal at all.
Part of this stage also includes concluding how long the consumer proposal will last for.
As mentioned in the introduction, it can’t be longer than five years.
The length will basically be decided based on how much you can afford.
The more you can afford to pay every month, the shorter your term can be.
Get the paperwork together & file the proposal
You won’t have to do anything at this point, other than provide some financial documents.
Your LIT will gather all of the essential paperwork and formulate the proposal in writing.
They require details of your current finances and all the debts you owe.
From here, they will write down everything you discussed and agreed upon during the previous stage:
- The total percentage of debt you can pay.
- How much you will pay every month.
- How long your proposal will last.
Once this has been done, they begin the legal process.
This will typically be done electronically via the federal government and the court.
The proposal is filed online, and you will be given something called a stay of proceedings, which prevents your creditors from trying to take money from you.
This stage in the process also signals the part where you no longer have to make debt repayments for the unsecured debts included in the proposal.
Effectively, your debts get put on hold while this entire process is handled.
Deal with creditors
When the proposal has been filed, your LIT will send copies to all of your creditors.
This is arguably the most important stage in the filing process.
They have 45 days to review your offer and decide if they accept it or not.
It’s also common for creditors to ask for a meeting to take place at the end of the 45-day period.
This will allow them to discuss things with you in more detail.
Of course, you will be with your LIT throughout any meetings with all of your creditors.
Think of this as the negotiation period where a solution is sought out that pleases all parties involved.
Following this meeting, voting will take place to see if your proposal is granted or not.
The weight of votes depends on the value of your debts.
In total, you need to reach at least 51% of the dollar value of your debts.
That sounds confusing, so let’s explain.
Say you have five creditors at the meeting, each of them holding 20% of your total debts.
Here, you’d need at least three to vote yes.
That means 60% of the value of your debts vote in favour, so it doesn’t matter if the other two say no.
It’s not uncommon to be in a position where fewer creditors vote yes than no, but you owe them the majority of your debts.
So, the motion will still pass.
If a meeting isn’t called, it’s assumed everyone agrees with the proposal.
Therefore, you can go proceed with the next steps.
Complete the terms of your proposal
Next, you will have to abide by everything detailed in your proposal.
Make your monthly payments as stated, and pay back the agreed-upon amount.
It is also legally required that you go to two credit counselling sessions.
Don’t worry, we provide credit counselling, so you can take them through us.
After completing all of your payments and attending the counselling sessions, you will give given a Certificate of Full Performance.
This is basically a legally binding document that states you have completed the terms of your proposal and are therefore relieved of any money still owed from any debts that were in your proposal.
Just like that, you’ve gone through the entire consumer proposal filing process and are clear to move on with your life.
It’s also worth stating that the consumer proposal will remain on your credit file for 3 years after you have made all of your payments.
It gives you an R7 credit rating, which is one of the worst you can have.
So, following the completion of your proposal, it makes sense to spend time building your credit score back to a strong position.
This is easier than you expect, it’s all about making wise financial decisions.
The knowledge you gain from your credit counselling sessions will help you with this.
File a consumer proposal in Ontario today
Do you need help with filing a consumer proposal in Ontario?
As Licensed Insolvency Trustees, we can guide you through the entire process.
Call us today to schedule your credit assessment and get the ball rolling.
Alternatively, fill in our online evaluation form and we will contact you regarding our debt relief services.
Consumer Proposals in Ontario
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal